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Employment Practices: Pay Close Attention to California’s New Fair Pay Act


Employment Practices Pay Close Attention to California’s New Fair Pay ActCalifornia’s new Fair Pay Act, in effect as of January 1, 2016, requires equal pay, regardless of gender, for employees performing “substantially similar” work – not just “equal” work, as previously was the case. The requirement also extends to different locations run by the same company, not just “the same establishment,” as under the earlier law. In addition, the law protects employees from retaliation if they seek information on wages or discuss them with colleagues.

The new statute is broader than the federal Equal Pay Act, and according to California’s Governor Jerry Brown, the act is the “strongest equal pay law” in the nation. “Sixty-six years after passage of the California Equal Pay Act, many women still earn less money than men doing the same or similar work,” Brown said. “This bill is another step toward closing the persistent wage gap between men and women.” On average, women are paid 78 cents for every dollar a man earns.

What does this mean for employers?

Specifically, the new law states that if there are wage disparities, the burden will be on the employer to show that the entire disparity is justified based on such factors as education, training, and experience. Systems that base compensation on seniority, merit, and production are also acceptable.

California employers need to ensure compliance with the new law, if they haven’t done so already. This involves taking several steps including the following recommendations by attorneys interviewed in a recent article in Society for Human Resource Management (SHRM):

  • For each company position, look at the essential job description to make a reasonable judgment as to what’s a substantially similar position. Once you’ve developed this matrix of substantially similar positions, factor in skill, effort and responsibility. Then, identify all the forms of compensation people get for those positions. Identify how decisions about pay are made and determine if there’s an inequity due to gender.
  • Through this process, patterns may emerge and you may see that some compensation for some positions is grouped closely and some may differ significantly. If they’re different based on a gender breakdown, determine whether there is a defensible basis for those differences.
  • Gain an understanding as to why there are any gender disparities, and then, if there are anomalies, modify the compensation system and change job descriptions or functions to make the pay practices both defensible and fair.
  • Have your internal payroll people analyze the data along with an attorney’s involvement. If changes are needed, do so and document them so you can refer to the changes down the road. Also, employers need to carefully document the reasons for compensation decisions. For example, document what prior experience an employee brings to a job. Be sure the documentation says, “These are the decisions we made and this is why.”

Other notable labor legislation changes in effect in California for 2016 include SB588 and AB970, which expands the power of the California labor commissioner to collect back wages and penalties from employers who fail to pay minimum wage and overtime, force employees to work off the clock, refuse to offer meal and rest breaks, or make illegal paycheck deductions. Employers can now be subject to stop-work orders, levies against their bank accounts and liens against their property. Employers, as well as owners, directors or managing agents acting on behalf of an employer, can be subject to criminal and personal liability. Companies will no longer be able to avoid judgments by changing names, as successor companies will be deemed liable if they engage in substantially the same work.

In addition, new law AB987 forbids an employer to discriminate or retaliate against a worker who requests accommodation because of a disability or a religious belief or observance, whether or not the request is granted. The law was passed in response to a court ruling that a company could not be held liable for firing a man who asked for paid leave to donate a kidney to his sister.

It’s becoming increasingly important for employers to be proactive in ensuring they are in compliance with new labor laws in California as well as in other states to mitigate the potential for lawsuits involving employment practices. Also critical is making sure your Employment Practices Liability Insurance (EPLI) policy properly addresses your exposures in the event of a workplace dispute such as discrimination. Axis Insurance Services specializes in securing EPLI coverage for employers and can review your policy to ensure that it will respond should you be faced with litigation. Just give us a call at (877) 787-5258.

Sources: SHRM, Orange County Register

 

 

 

 

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Blogged on: January 11, 2016 by Mike Smith
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